There are a lot of decisions you'll need to take when you sell your home. You'll want to choose an agent - or perhaps go for sale by owner, or talk to Sellable about our structured sales process. But one of the biggest choices you'll have to make is what price to sell at.
How Much is My House Worth?
Whatever process you use, you'll first need to have an idea of what your house is worth. If you bought a few years ago, and are moving up the ladder, you might have a pretty good idea already; but for those who have lived in the same home for decades, and are perhaps selling to downsize for retirement or to move into an assisted living property, the price levels of the real estate market today can come as something of a shock. So let's look at how to determine the value of your home.
One way is to ask the experts. You can ask estate agents to deliver a property appraisal. They'll take a look at your house - usually for free - and give you an idea of the market value of your home. But remember, agents may name a higher price than is really justified, because they're in the game to get your business, and they know you're unlikely to hire an agent who gives you a pessimistic appraisal.
Different agents will probably have different opinions. Some will give you a single price; others will name a range. There could be as much as 25% difference between the best and worst estimates of your home's market value that could easily represent $100,000 or more, so make sure you ask three or four agents.
The best agents will not just give you a price, but will create a comparative market analysis for you. You'll get the most out of the process if you don't just ask for a price, but use the agent's visit as a chance to educate yourself about the market. Ask questions like these:
- How often do properties like this come on the market? How many do you have on your books at any one time?
- Is my house typical? What features (or absence of features) make it more or less valuable?
- What are buyers looking for? What kind of purchasers are looking in this area - families, young couples, older professionals?
- How long are houses taking to sell?
You might also decide to get a property valuation. While an appraisal is just educated guesswork, a valuation uses a structured methodology to produce an in-depth report. A valuation also has legal standing - valuations are used by banks, and for legal purposes such as the sale of a deceased estate or apportioning assets after a divorce. You'll pay a fee for a valuation, but if your property is unusual or at the very top of the market, it could be worth it.
Get Yourself an Education
Twenty years ago, access to information about real estate prices was limited, so vendors had no choice but to trust what estate agents told them. Now, there's a huge amount of market data available on the internet, such as APM Price Finder. You can educate yourself about property prices and that will help you make a better decision when you come to price your home for the market.
You'll want to look at recent sales - the last three months or so - since property prices don't stay still. You'll want to look in the immediate area; for instance, in city centres, the market can be very different either side of a main street, and in suburbs, you probably don't want to look more than half a mile away at the very most, more likely just a quarter of a mile.
And you need to compare apples and apples. For instance, if you live in a beautiful old property, don't compare it with modern villas; if your house was built in the 1990s, it may not compare too well with the houses in a 1970s development two roads away. Look at properties which have broadly the same square footage (give or take 10%), the same amount of garden, and the same condition (be honest with yourself here!).
Once you've pulled the data, you'll want to look at a number of different factors.
- Obviously, the sales price is the first thing you're interested in, for recently sold homes.
- But you should also look at how long the property was on the market. Do higher priced properties take longer to sell?
- If you can find asking prices vs sold prices, you'll be able to see whether properties are selling above or below list price - that tells you whether you're in a buyer's or seller's market.
- Calculate the price per square foot of each property. That gives you another way to look at your home's market value. But remember, the price per square foot tends to fall as the size of property increases. A small apartment will sell for more dollars per square foot than a large villa.
You can also look at similar properties that are on the market now. But remember, they may not achieve the prices that are being asked, so take the prices with a grain of salt.
If you really want to understand the value of your home, you should also visit some of the properties that are on the market. Get a feeling for their condition and whether they're well presented, and how that feeds through to pricing. Have the properties been home staged? Are they being well marketed? Remember, when you put your home on the market, these properties will be your competition.
Price Your House to Sell
If you've done your work properly you will have a range of prices, but that still won't tell you the right price for your home. There's a bit more work to do.
The right price may depend on your circumstances. If you need to move fast, perhaps for a new job or before a new baby arrives, then the amount you receive might not be as important as the certainty of securing a sale. On the other hand if you're aiming to downsize, then you may decide sticking out for the best price you can get is important.
The right price will also depend on the market. If you're in a buyer's market where properties are taking months to sell, you may need to price to sell - if you're in a seller's market and houses are getting snapped up on the first open weekend, you can be more ambitious. If prices are headed up, you can even price up to 10 percent above the last sale.
Remember that if a house doesn't sell after a month or so, it loses its freshness and it can be difficult to attract buyers' interest. If you set a price that gets visitors in, you have a better chance of receiving competing offers; you might end up getting more than your asking price.
Can You Improve Your Price by Adding Value?
Your market research will have shown you what similar properties look like, and whether yours falls below the usual standard. For instance, if you haven't redecorated for 15 years, your house might look tired. It's worth looking at what it would cost to refresh your property, and how much that would add to the price. Cosmetic repairs such as a fresh coat of paint and new landscaping might add significantly more to your home's market value than the cost of the works.
If you have worked hard to get the right market data, you should have a good idea of exactly what your property should sell for - before and after renovation. Having hard facts makes it much easier to evaluate your options and take the decision.
You may also want to consider home staging. Again, you'll have a feeling of how to compare prices and costs - if home staging costs $4,000 but adds $20,000 to your likely sale price, then obviously it's a good investment! As an average, home stagers say good styling can add 10% to a property's price - but that will depend on the type of property, the demographic of potential buyers, and the specifics of your local market.
Different Types of Pricing
Remember that there are different ways to price your home. You might set a specific asking price, but you could also ask for offers above a certain figure, or indicate a price range. Of course you could also choose an auction - which gives you three chances to sell; prior, in the auction, or afterwards if the property doesn't meet its reserve at auction.
Setting a range with an attractive bottom price could help to attract potential buyers, while clearly indicating that you expect offers to come in higher. However, you shouldn't set a range of more than 10% (in Victoria, it's actually not legal to do so), so you need to think carefully about your tactics. If your top price is below your best expectations of price, you might be pitching too low.
A price range can be a good way of indicating that you're open to negotiation. Buyers who might balk at a single price of $650,000 might feel much more inclined to visit a property showing a $600-650,000 price range - even though the top of the range is the same, and even though both properties might, in the end, sell for $635,000!
When Will a Price Reduction Help?
Some sellers put their house on the market at the highest asking price they think is achievable. But this can be a mistake. If too high, an asking price deters potential buyers from visiting the property.
True, you only need one offer at the right price. But if a property has been on the market for a while without any offers (or any acceptable offers), it could be time for a price reduction to regenerate interest. If you have put your work in on the market data, you'll have a good idea of what kind of price screams "bargain!" to buyers searching for a property in your area.
In a falling market, price reduction may be needed if a house has sat unsold while the market has headed downwards. If this is the case, it's worth biting the bullet and making a reduction that anticipates the next couple of months of downtrend. If the house doesn't sell, you may have to reduce again - and that won't be pretty.
Another Way to Sell
Alternatively, you might want to work with Sellable. We'll guarantee you a base price for your property, and we'll share any profit we make by selling above that price with you. Use our tool to find out what your property is worth!